Despite the expertise and dedication that goes into a title search, hidden title defects can emerge after completion of a real estate transaction, leaving the buyer without clear title. Title defects can be an unpleasant and costly surprise. Some examples include:
Title insurance, through a company like Landwood Title, is a simple step buyers and sellers can take to protect themselves against loss or damage due to potential problems with the title to their property.
The title company will perform a title search before issuing a title insurance policy. This Labor intensive process searches the history of the property from the county records. The search results may uncover items that need to be corrected before a clear title can be conveyed, such as:
The title company will issue a preliminary report on the property. A preliminary report gives the buyer, seller and lender an opportunity to review any potential title defects that are to be cured or shown on the title policy.
Your real estate agent should review the preliminary report as soon as it arrives, with particular attention to certain areas:
The name on the report should match the names on the purchase contract. Sometimes the names of an unexpected owner will appear and a corrective document may be required.
The plat map and legal description should match the address. An owner could own two properties adjacent to or across the street from each other, causing confusion and identifying the correct property.
Carefully review the exceptions. Common exceptions include current taxes, bonds, Mello-Roos assessment, Covenants, Conditions and Restrictions (CC&R), easements and deeds of trust. Be sure the CC&R’s or existing easements don’t interfere with the buyer’s future plans. For example, an easement across the backyard could have profound effect on the buyer’s ability to add a swimming pool.